Exactly. For most funds, there is no attempt at capital preservation, ie convert to cash if the market doesn't look good.

That is why for most funds, the ups and downs follow the index they are benchmarking with. The better funds will beat the index, the lousy funds will dip below. But that doesn't mean much when say, the index drops by 50%, and your fund only drops by 45%.

Yes, I agree investors should attempt to do capital preservation by withdrawing in a bear market (hopefully before, and not after). In fact, you don't have to withdraw as many fund houses allow you to switch to low risk funds, and then switch back in future without incurring any service charges.

But when do you do it is not an easy question to answer, unless you have perfect hindsight. You don't want to do it too often as that would defeat the purpose of a fund manager managing on your behalf. Even in a bear market, you may not want to do it just in case the market goes back up. But what is a bear market? If you look at the charts, there were a couple of periods in 2007 where there were sharp downturns, but then the markets recovered pretty quickly and went even higher.

So what do you do? Sit and wait for the markets to recover? Or sell? If you sat and waited in 2007, you would be right. If you sat and waited in 2008, you would be wrong. The decision is yours.